It is not well known but the EU harbours several attractive tax havens, says
David Franks.

Whilst most EU countries are increasing their tax rates and removing tax exemptions, some are also offering deals to attract foreigners to come and reside, and even bring their business or set one up. Here are some of the most attractive tax destinations in Europe - though it is not an exhaustive list.

Portugal offers the new tax resident an income tax free holiday for 10 years, including receiving your pension tax free. They have a reasonable range of double tax treaties to protect the income from being taxed in the country of origin. Capital gains however remain taxable in most circumstances in Portugal, except that gains on the sale of UK property by a Portuguese resident is tax free. Legitimate offshore structures are available to shelter gains and income regardless of the new 10 year exemption.

The 10 year tax holiday was introduced back dated to 1st January 2009, but the Portuguese tax authorities have been dragging their feet on granting any exemptions, placing several (probably illegal) hurdles in the way. Nonetheless, with careful planning, this exemption will have to be granted and if combined with some other tax structures, makes Portugal an attractive haven.

France now grants a five year wealth tax holiday for Brits (along with several other nationalities, such as Canadians and Germans) to exclude non-French assets from wealth tax. France is one of the few countries with which the UK has an inheritance tax double tax treaty. With careful planning before becoming a French tax resident, the UK domicile can avoid both UK as well as French inheritance tax whilst also ducking out of French succession laws. France has an extremely favourable tax rate on annuities, and certain pensions can be so classified.

Spain attempts to look through offshore trusts, but where the trust assets consists of certain Spanish tax favoured structures, the investor will be safe. There is no Spanish succession tax on non-Spanish assets left to an offshore trust. Spain introduced the Beckham Provisions (named after the footballer) to significantly reduce the taxes on incoming employees. Spain’s annuity tax treatment remains very competitive and can be applied in certain cases to overseas pension funds.

Cyprus taxes foreign pensions at a mere five per cent, and the expatriates are free from nearly all capital gains tax. The benign taxation of insurance bonds in Cyprus means the country remains a favourite.

Malta taxes expatriates on a remittance basis charge of just 15 per cent so there’s no tax on income kept or spent offshore. Offshore capital gains are also tax free, whether remitted or not. These tax breaks even apply to returning Maltese domiciles who have lived outside of Malta for the previous 25 years.

The floater

The floater (a person who is not tax resident in any single EU country, yet lives in Europe) is still a legitimate arrangement. You would probably have to move between at least three countries throughout the year. But with the tax haven provisions already on offer to tax residents, it is probably easier these days to sign up as a tax resident in a EU country, pay minimal taxes and take advantage of the double tax treaties available only to residents.

The UK remains a tax haven for UK non-domiciles, although after seven years of tax residence in the UK the new remittance basis charge of £30,000 per annum becomes payable if the remittance basis continues to be claimed. Even then there are alternative tax saving possibilities after the seventh year. The non-UK domicile remains outside of the UK inheritance tax net unless he/she has lived in the UK for 17 out of the previous 20 years.

Sweden has abolished both wealth tax and inheritance and gift tax. Insurance bonds now offer significant benefits in Sweden

A few other countries, including Andorra, Monaco and Switzerland also offer powerful tax haven advantages and are only a short drive away from their EU neighbours.

TAX-FRIENDLY TIPS TO TAKE ABROAD

Consider assurance bonds

Approved assurance bonds can be used in a number of different countries very tax efficiently. These countries include the UK, France, Spain, Italy, Malta, Portugal and Cyprus. Each of those countries have different rules, and it has to be a tax approved policy, but they continue to offer significant benefits, especially when linked with a Trust.

Use a trust

Trusts can be used in a number of overseas countries, but the UK domicile must be careful that he/she does not run up a UK inheritance tax bill. There are trust structures which can avoid this.

Join a QROPS

QROPS (Qualifying Recognised Overseas Pension Schemes) remain a way of freeing up your UK pension fund from UK PAYE whilst also offering the opportunity to receive more favoured tax treatment in your new country. The fund is completely free from UK inheritance taxes. The new providers of QROPS, such as Malta and the Isle of Man, are vying with each other to attract business by applying more generous conditions.

David Franks is the founder of Blevins Franks and regularly advises individuals looking to live overseas on financial and tax matters. Blevins Franks provide The Telegraph's Expatriate Wealth Service. For all inquiries call 0800 027 7756, email expatwealth@telegraph.co.uk or visit telegraph.co.uk/expatwealth

This is the third of four articles on expatriate finance which David will be writing for Telegraph Expat. If you would like to receive financial advice from David or another member of the Blevins Franks team, post a question on our MyExpat discussion board